Retail brands: price always has a context

Marianne Bickle takes JC Penney’s to task over their pricing strategy in this pithy and thought-provoking post in Forbes. In it, she argues that the retailing icon misread the market in key ways and compromised its value proposition when it replaced its famous coupon and discounts pricing strategy with a policy that stressed continuity, consistency and predictability.

People buy emotionally, argues Bickle, and that emotion extends beyond the shop doors. It reaches all the way to the macro-environment that influences their wallets. It’s critical therefore that brands understand how their consumers feel about the economy. If things feel uncertain – and nearly two-thirds of JC Penney customers were saying they didn’t feel the economy was strong – don’t change what they know. It not only makes a new pricing strategy undesirable, it’s also destabilising. And people are much less prone to buy when things don’t feel as they have.

It’s also vital, Bickle points out, that brands understand how people buy, not just what they buy. In the case of JC Penney, over 60% of consumers buy clothing when it is on sale. In that context, coupons and discounts make sense. They contribute to the sense of bagging a bargain. They are the JC Penney experience for many people. Everyday, predictable pricing doesn’t do that. For a start, it’s a killjoy – where’s the thrill of saving now? Secondly, and I would argue even more importantly, killing off coupons represents a change of habit. No coupons means a different way of shopping than JC Penney customers are used to, and, by extension, no particular reason to choose JC Penney.

On paper I’m sure the decision looked sensible: people will know what they’re getting and we can all stop playing games. The problem is, curiously, that for many shoppers the games are part of the fun. In a 2001 study on The Emotional Side of Price, Regina O’Neill and David Lambert of Suffolk University examined the role that emotion plays in consumers’ reaction to price. Their findings certainly explain some of the reactions that consumers have had to the JC Penney pricing shift. They also suggest a number of important considerations.

Here’s what O’Neill and Lambert found:

a) People who are more engaged and involved with a product have greater feelings of delight, joy, and happiness than those who are less involved. In the case of high end products, that association obviously has to do with the products themselves. In the case of JC Penney, however, coupons and bargains provide a tangible means of involvement that flat pricing does not. They are more than just a mechanism. They actually represent an emotional bond.

b) Enjoyment correlates with price–quality. People who enjoy products more also believe that higher-priced products come with higher levels of quality. In the case of JC Penney, consumers could see the “value” of what they were buying, which gave them reassurance, and they were able to get a discount. Flat pricing, on the other hand, meant they were just getting what they paid for, which is a whole lot less fun.

c) There is a direct relationship between surprise and enjoyment. People come to shops like JC Penney to enjoy being surprised. They may come for the discounts they know about, but it’s the discounts they didn’t know about that impel them to impulsively buy. Predictable pricing takes away all the thrill of the chase and all the surprise of discovering a bargain they hadn’t bargained on finding. When you know what’s round the next corner, there’s no need, beyond need, to go there.

d) People reinforce their behaviours through the emotions that those behaviours generate. For example, O’Neill and Lambert report, people who buy athletic shoes on sale also buy the lowest-priced shoes, rely heavily on price when they buy, and report the most surprise with prices. The same behaviour would logically extend to JC Penney. The more people buy on price, the more they depend on pricing not just as an economic but also as an emotional reward. Predictive pricing flatlines the price, and by extension flatlines the emotion. The self-congratulation factor disappears.

As I said at the start, when you change the shopping experience for people, you change more than what people get. By implication you also change the context within which they shop. I’ve written in detail elsewhere about how I think retailers should use full and part-service models to differentiate full price and discounted stock and retain perceived brand value. Here’s some further thinking to accompany that based on Bickle’s insights and the findings of the Sussex team:

1. Acknowledge how people are feeling – it provides empathy. Aspiration is not the only tool emotionally. Look for other cues beside the obvious ones like season end and retail “occasions”. So many retailers position things on their terms and to their priorities rather than tuning into what’s running through their customers’ heads.

2. If you are going to change a successful experience (and by successful, I mean one your customers feel works for them) build on what they know and trust rather than changing it completely. You may well need to make changes to make the experience work more effectively for your business, but don’t lose sight of the fact that this is how people are used to shopping with you. Unfamiliar experiences are unsettling.

3. Adjust the reward set on your inventory – but make sure it is a reward. So many retailers subconciously position inventory control as ‘we don’t want this anymore, do you?’ In most circumstances, especially for fashion-focused sectors, the value proposition will probably change as the stock dates. The key question to think through in determining reward sets for a customer is “why would they buy this now?” (as opposed to “why are we still stocking this?”). The reward now on day one can be very different from the reward now on day 120.

In most cases, a simple reversal of question will ensure that these considerations are thought through and met effectively.

Don’t ask: What do we want and how do they benefit in return?
Do ask: How do they benefit and what do we want in return?

The more they benefit, the more you should want. Equally, the less they stand to gain, the less you should expect. Have you costed for that? Because that’s the real role of price.